The Federal Reserve and the Financial Crisis: Discussion Questions

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Note to instructors: The four lectures are divided into video clips covering specific subjects discussed by Chairman Bernanke. Most of the clips range from one to four minutes in length,
with a few as long as 10 minutes.

Questions are provided to assist instructors in guiding class discussion following the viewing of a clip. The questions could be distributed prior to showing a clip if so desired. The majority of the questions focus on material contained within each clip; some extend the discussion by asking students to consider the implications of the material within each clip or to explain how a specific policy might work.

Explain how monetary policy can function to achieve economic stability. What is the role of interest rates? Explain the process of how the Fed changes interest rates and how those changes encourage an appropriate increase or decrease in spending in the economy?

Analyze how a second tool, the provision of liquidity, can help to promote financial stability. Describe how the lender-of-last-resort function of a central bank can reduce runs on banks.

Summarize the economic conditions and events during the Great Depression. Discuss the stock market crash, the change in price levels, the fall in output, the rise in unemployment, and the increase in the number of bank failures.

Describe the major causes of the Great Depression and explain how each of them may have contributed.

Summarize the role of deposit insurance in ensuring financial stability.

Why would the abandonment of a gold standard positively affect economic conditions?

List the primary monetary and fiscal policies that were used during the Depression. Evaluate the effectiveness of those policies. What can we learn about policy today from that experience? What would be a more effective set of solutions?